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> Posted by Kim Wilson, the Fletcher School, Tufts University

In the olden days, awards were not given for innovation itself but for how effective an innovation was in relation to the importance of the problem it solved. But what we see today in financial inclusion is the ubiquity of innovation – often front and center – as the lead determinant in a plethora of prize competitions. Check the first judging criteria of this prestigious contest.

Why would the entity commissioning the award, The Wall Street Journal, care about how innovative or unique the business was or how it broke from tradition? Wouldn’t it care most about how well the service solved a problem and the problem’s significance?

In financial inclusion, innovation itself has been an endgame for quite some time. Take the much-hyped “Keep the Change,” Bank of America’s program to hoover in payment leftovers at the cash register. If you buy $3.80 worth of coffee, the amount is rounded to $4.00 of which twenty cents goes to your bank account. Greeted as a clever way to encourage savings, the idea was indeed innovative back in 2006. But was it good? Here is what a critic, citing another critic, had to say about Keep the Change: “If you want something that makes it quick and easy, lets you fool yourself into thinking you’re actually saving, (spend-to-save) programs are good.” But despite this perversion, Keep the Change has been the winner of multiple awards, many with innovation in their descriptions.

Plenty of ideas are creative and go nowhere. That’s where the ideas I have in the shower go, where they should, down the drain. But innovation is the crack-cocaine of the funding world. Funders including donors and impact investors want to be thought of as doing something new and what is newer than innovation? Innovation is the new excellence, the new buzzword, the new impact.

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> Posted by Sonja E. Kelly, Fellow, CFI

The following post draws observations from the just-released FI2020 Progress Report on Technology. See the full report to explore other topics and cast your vote on global progress in advancing financial inclusion.

Technology innovation is dramatically changing the financial services landscape—and quickly. No longer are simple 2G/SMS-based payments the talk of the financial inclusion community. Instead, a range of platforms and products and services promise that as we move into the future, the costs of providing services will be lower, and the base of the pyramid will be within reach for mainstream financial services providers.

The world in which these innovations are mainstreamed is one where the agent network concerns we have today will be gone. In the cash-lite or cash-free world that technology providers are seeking, there will, in fact, be few to no agents, as people will receive money electronically and spend it electronically without ever converting it to cash. When is the last time you went to a banking agent?

Consider the following innovations that allow important financial transactions to take place without a detour through cash. (For a more comprehensive list of innovations, see the FI2020 Progress Report on Technology.)

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> Posted by Bruce J. MacDonald, Vice President, Communications & Operations, CFI

(Photo by Damon Jacoby ©2015)

In New York yesterday to celebrate the launch of the FI2020 Progress Report (and Accion’s and Citi’s 50-year partnership, and the awarding of the first Accion Edward W. Claugus Award – Accion never does anything by halves…), we had the privilege of an audience with Dr. Daniel Schydlowsky.

Dr. Schydlowsky, recipient of said award, hardly needs introducing. As Superintendent of Banking, Insurance & Private Pension Fund Administrators for Peru, and as chair of the Alliance for Financial Inclusion, he symbolizes the gold standard of financial inclusion regulation. Scratch that – he is the gold standard. Peru has ranked at the top of the Economist Intelligence Unit’s Global Microscope report for seven consecutive years. And to paraphrase the old E.F. Hutton TV ad, when Daniel Schydlowsky speaks, people listen. “We can perfectly well keep banking systems safe, and still do something for inclusion,” he said, explaining his philosophy of regulation (and thereby, perhaps, Peru’s standing). “Indeed, the more we include, the safer we’re making the banking system.”

Like our new Progress Report, Schydlowsky outlined his view of what lies ahead and what he’s excited about. First up: The promise of new loan-origination techniques. Making microloans is an artisanal craft, and thus expensive. But he is optimistic about the promise of new developments: big data, customer-relationship tools, and psychometric training (again, as is our Progress Report). Come to Peru, he urged innovators, where you will find a willing partner and audience.

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> Posted by Elisabeth Rhyne, Managing Director, CFI

Today the Center for Financial Inclusion (CFI) is proud to launch the Financial Inclusion 2020 Progress Report, an interactive website that portrays the recent progress and unmet challenges on the path to global financial inclusion.

When we began the FI2020 project in 2011, we hoped to create a sense of both urgency and possibility. We believed that enabling everyone in the world to gain access to quality financial services was a goal of major development significance. We also saw that with many active players and the promise that digitization would enable many more people to be reached at lower cost, it was no longer simply wishful thinking to call for full inclusion within a reasonable time frame. Global financial inclusion had entered the realm of the possible.

Today, in 2015, we are both astonished by the progress and daunted by the gaps that remain. Global Findex data shows 700 million new accounts in the three years from 2011 to 2014, reducing the number of unbanked worldwide from 2.5 to 2 billion. National governments have created ambitious financial inclusion strategies, the FinTech industry is exploding with $12 billion in global investments in 2014 alone, and the World Bank has a plan for reaching universal financial access to transaction accounts by 2020.

Our quantitative review, By the Numbersrevealed that if the current trajectory of expansion in accounts continues, many countries will achieve full account access by 2020. The rails are being laid at a rapid rate, and there is great momentum toward universal access. But access to an account is not the same thing as financial inclusion, and progress toward meaningful financial inclusion, in which people actively use a full range of services, is lagging. The passengers – customers – are often still waiting at the station for services that take them where they want to go.

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> Posted by Larry Reed, Director, the Microcredit Summit Campaign, and Jesse Marsden, Research and Operations Manager, the Microcredit Summit Campaign

In collaboration with the CFI’s process to develop the Financial Inclusion 2020 Progress Report, the Microcredit Summit Campaign recently conducted interviews with microfinance leaders* around the world committed to reaching the most excluded. In this post, we share some of the insights from these conversations about how to ensure that the most invisible clients are financially included, directly drawn from the experiences of those who are doing it.

To set the stage, Luis Fernando Sanabria, General Manager of Fundación Paraguaya, made this central point: “Our clients need to be the protagonists of their own development stories. Our products should be the tools they use to meet their needs and empower their aspirations.” With that reminder of the purpose of financial inclusion, we begin the discussion by asking who are the most excluded.

In each country, people living in extreme poverty (below US$1.25 a day) make up the largest segment of those excluded from the financial system. We spoke with leaders from organizations that make intentional efforts to reach this large excluded market: Fundación Paraguaya; Pro Mujer; Fonkoze; Plan Paraguay; Equitas; Grama Vidiyal; and TMSS. These organizations not only address poverty, but also a host of other dimensions that lead to exclusion, including literacy, race, gender, physical disabilities, and age. Less frequently-discussed reasons for exclusion include sexual orientation, language barriers (especially among indigenous populations), and mental or emotional health issues. In India and Bangladesh, for example, those interviewed noted that the lack of personal identification often drove exclusion, especially among women, persons with disabilities, and the socially excluded, such as transgender individuals.

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> Posted by Center Staff

Are you a senior leader at a financial institution serving lower-income clients in sub-Saharan Africa? The Africa Board Fellowship (ABF) program might be for you!

The six-month program was launched late last year to foster peer-to-peer learning and exchange on governance practices among board members and CEOs at African microfinance institutions. The fellowship begins and ends with multi-day in-person seminars; in between seminars, fellows are connected through a virtual collaboration space that includes discussion forums and dialogues.

The first cohort of ABF fellows convened in early June in Cape Town. Guided by the program’s seasoned faculty, advisors, and subject experts, fellows examined a wide range of topics, from board dynamics and managing sustainable growth to technology trends and risk management. A blog post on the inaugural seminar can be found here.

The above video shares highlight footage from the inaugural seminar, as well as remarks from ABF fellows and staff on the program.

For more information on the Africa Board Fellowship, including details on how to apply, click here.

> Posted by Andrew Fixler, Freelance Journalist

On August 4, Facebook received approval on a patent it had purchased in a bundle from the defunct social network Friendster. It primarily describes a mechanism to weed out content depending on whether it travels via trusted nodes in a user’s social network. This might not have caused much of a stir, had it not been for entrepreneur and blogger Mikhail Avady’s revelation that the patent also includes the following application:

“In a fourth embodiment of the invention, the service provider is a lender. When an individual applies for a loan, the lender examines the credit ratings of members of the individual’s social network who are connected to the individual through authorized nodes. If the average credit rating of these members is at least a minimum credit score, the lender continues to process the loan application. Otherwise, the loan application is rejected.”

Many commentators and journalists reacted with alarm, while Facebook has not offered comment on the story. It is unclear whether or not a product will be developed out of this particular embodiment of the invention. A Daily KOS headline proclaims that “Facebook Gets Patent to Discriminate Against You Based on Your Social Network”, and a Popular Science writer notes that “It’s totally not something straight out of a cyberpunk dystopia”. This MSN article warns readers to purge their less trustworthy friends, though it also notes that the technology could relegate some consumers to riskier lenders. In the non-financial press, less attention is given to the potential upshots for thin-file loan applicants. The list of concerned news outlets stretches well beyond the first page of search results I examined after Googling the patent’s text.

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> Posted by Sonja E. Kelly and Misha Dave, CFI

Dhanalakshmi (far right), client at Equitas

If there is one thing we have learned from working on disability and age inclusion in financial services, it is that including these populations in financial services is in some ways easier than practitioners expect it to be but, in other ways, harder than it looks.

In our research on aging and financial inclusion, one of the key insights was that financial service providers of all sizes often apply age caps on credit products. However, many institutions we talked with did not know exactly where these standards came from. Some attributed them to concerns about life expectancy of older clients, some to institutional history (“that’s just the way we do it”), some to the increase of credit portfolio insurance it would incur, and some to a perception of older people as economically dormant.

Many of these concerns can be mitigated by better research and dispelling myths about the creditworthiness of older people. Easy, right? In fact, there are some institutions that apply creative ideas to providing credit to older people. Group guarantees and automatic withdrawal payments on loans from publicly administered pensions through government partnerships are both examples of this.

However, such institutions providing credit to older people seem to be the exception rather than the rule. Worse, convincing institutions to care about this population is not easy. One institution we spoke with in India was baffled by the idea of providing credit to people over the age of 55. “But [the older people] could die and wouldn’t pay the loan,” the product developers insisted. Doing the research and articulating the issue was the easy part — now the hard work begins of advocating on behalf of older people.

Similar attitudinal barriers exist in financial institutions for serving persons with disabilities. Let’s take stock: over one billion people around the world — 1 in 7 of us — have a disability and four-fifths live in developing countries like India. Despite this and the fact that many microfinance institutions (MFIs) claim to be dedicated to “serving the world’s financially excluded people,” less than 1 percent of their clients are persons with disabilities.

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> Posted by Sonja E. Kelly, CFI

A couple months ago we announced a new program coming out of the Center for Financial Inclusion and Accion designed to produce actionable research for the microfinance and financial inclusion industry. We’ve been busy since, overwhelmed by the positive response we had to our announcement, and torn between many high-quality research proposals.

In recent days we selected four fellows to carry out research that we think will have an influence on the future of financial inclusion. Without further adieu, I would like to introduce you to…
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Three questions every ‘pro-poor’ group needs to ask themselves

> Posted by Chris Dunford and Carmen Velasco

The following post was originally published on NextBillion.

This month, the United Nations will celebrate achievement of Millennium Development Goal No. 1. The number of people living in extreme poverty has fallen by more than half, from 1.9 billion in 1990 to 836 million in 2015. How did this happen? Is it because of targeted anti-poverty programs, or is it due to broad-based economic growth, especially in China and India? If economic growth is the main cause, as it seems to be, further progress may be doubtful. Economic growth alone is unlikely to reach the residual hundreds of millions still living in extreme poverty.

Nor is it likely that anti-poverty programs, whether public or private, will lift this “bottom billion” from extreme poverty. For example, the U.S. poverty rate hovers around 15 percent of the population, nearly unchanged for decades, despite the hundreds of billions of dollars spent on U.S. anti-poverty programs. For another example, in poorer countries, microfinance was billed as a self-financing solution to deep poverty and became a darling of international development donors in the 1990s and “social investors” in the 2000s. Then smart social scientists tested the claims with sound field research and found little to no impact on poverty.

Is it reasonable, however, to expect anti-poverty programs, by themselves, to lift large numbers of people above an arbitrary poverty line? Given that the poor must overcome many burdens before they can seize whatever economic opportunities are available, perhaps we should ask a different question:

Do anti-poverty programs ease the burdens of poverty?

While the recent research into microfinance shows little to no increase of annual household income, on average, the same studies very often show that the burden of poverty is alleviated by giving microfinance participants access to money when they really need it during the year. Economists call this impact “consumption smoothing.” In plain terms, it means people get enough to eat throughout the year instead of going without adequate food for a day, a week, or even months at a time. If so, this is an impact worth celebrating, is it not?

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Credit Suisse is a founding sponsor of the Center for Financial Inclusion. The Credit Suisse Group Foundation looks to its philanthropic partners to foster research, innovation and constructive dialogue in order to spread best practices and develop new solutions for financial inclusion.


The views and opinions expressed on this blog, except where otherwise noted, are those of the authors and guest bloggers and do not necessarily reflect the views of the Center for Financial Inclusion or its affiliates.

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